abrdn Myfolio Value Assessment

engagedandopen

Hi,

My Standard Life Active Money Personal Pension is wholly invested in Myfolio Multi-Manager V and I have read the latest (just published) Value Assessment.

Certainly the entire Myfolio Multi-Manager range and the Myfolio Managed range are (thankfully honestly) marked as red for underperformance.

The Multi-Manager holdings look sensible and diverse to me, they have removed the previously large absolute returns allocation and I don't think 1.54% is too expensive given that, say, Jupiter Merlin can cost 2.1%-2.8%.

Given that markets have been down so much this year anyway, is it best to give it 3 years (Yoram Lustig's recommendation for active funds)?

Thanks in advance!

P.S. I know Vanguard is popular on here but not for me (I use L&G for my multi-asset passive strategy).

JohnWinder

I don’t know Lustig’s advice, so could you tell us of any evidence he bases his ‘3 year’ advice on?

Your Myfolio Multi-Manager V does look diversified but replete with active funds which your managers up or down-size; it needs to stay well away from being like a fixed mix of index funds, or you might as well choose that and save yourself 1%/year in fees. Getting better than market returns with active management is pretty hard the data suggests, and the higher the fees the harder it gets because of that headwind. 

But if you’re dead set on having some active funds like this, then don’t worry about their performance because you’ve got more money than you need, or, before you invest in them (or anything else) set out in writing your reasons and a plan for how you’ll manage the investments in the future. That saves you having to re-think the whole business each time bad returns are reported, and better, it helps protect you from emotional response investing, eg ‘that’s not doing well, I should sell or I’ll lose more’. Unless you’ve got so much that it doesn’t matter there might be a couple of things you can do to manage your investing so it’s based on the best available evidence. 

On that note, back to Lustig, what’s his evidence? Because there’s enough to strongly suggest that good (and poor) performance by active funds commonly does not persists (see the SPIVA data), so better to sell the winners and hold the losers!

[Deleted User]

and I don't think 1.54% is too expensive given that, say, Jupiter Merlin can cost 2.1%-2.8%.

I am sure you can find someone charging 4% if you really look but how does it make 1.54% inexpensive if you can get great diversified alternatives for one tenth of the cost?  

Its true that an active fund’s manager can’t be judged based on a single years performance.  Still, the long term difference, on average,  is down to cost, so that’s a bad omen.  In this day and age even active funds can be bought far cheaper than this. 

engagedandopen

Thank you for your thoughts, John.  Yoram mentioned it in his FT book on Planning Your Retirement a while back.  I don't recall the rationale he gave, but I would think it's possibly related to the average economic cycle.

I was comparing 'apples with apples': the charges between similar Multi-Manager funds.  Aviva's Multi-Manager Flexible fund generally outperforms its benchmark at 1.6%.

There are certainly cheaper and strong performing multi-asset active funds like BNY Multi-Asset Growth, or Liontrust Sustainable Future funds on Aviva's stakeholder contract, but then you have 'manager concentration risk' to monitor.

JohnWinder

That’s a good point to diversify manager risk. I imagine it means your fund managers’ job is to choose their fund manager for European funds and small cap funds and emerging market funds etc, as well as decide how much of each they will hold in the fund at any time. We have a surrogate measure of how well they might do the former ie, choose different funds to include, in research looking at how well pension fund consultants perform in advising pension funds which funds/managers they should choose to include in their pension fund. They didn’t do well: 

‘Investment consultants advise institutional investors on their choice of fund manager. Focusing on U.S. actively managed equity funds, we analyze …. how well the recommended funds perform. … we find no evidence that these recommendations add value, suggesting that the search for winners, encouraged and guided by investment consultants, is fruitless. The Journal of Finance, 2015, Picking Winners? Investment Consultants’ Recommendations of Fund Managers. For what it’s worth, probably not much.

Albermarle

Deleted_User said:

and I don't think 1.54% is too expensive given that, say, Jupiter Merlin can cost 2.1%-2.8%.

I am sure you can find someone charging 4% if you really look but how does it make 1.54% inexpensive if you can get great diversified alternatives for one tenth of the cost?  

Its true that an active fund’s manager can’t be judged based on a single years performance.  Still, the long term difference, on average,  is down to cost, so that’s a bad omen.  In this day and age even active funds can be bought far cheaper than this. 

The OP has their pension with a traditional insured provider, Standard Life ( maybe it is an employer pension).
Although they will have cheaper funds and they nearly always have discounts for fund size, or employer negotiated discounts, you can not get as low as you could with a low cost investment platform. Typically would be in the 0.3% to 0.7% range. Probably the 1.54% quoted for the managed fund is only the headline cost and there will be some kind of discount from it as well.
In addition this type of pension has typically no extra charges for changing funds, withdrawing money etc 

Of course though you are right that you can get cheaper.

engagedandopen

Yes, it's notoriously hard to outperform the S&P 500.  And what I find in abrdn's Multi-Manager V fund is about a 10% allocation to a US tracker, which is reassuring.  Likewise, Aviva use an index tracker for their exposure to US and Asia Pacific markets in their Multi-Manager Flexible fund.  Though they both have specialist active funds too for the US market - I can't access the abdrn one on my Aviva Pension Sipp.

engagedandopen

Albermarle said:

Deleted_User said:

and I don't think 1.54% is too expensive given that, say, Jupiter Merlin can cost 2.1%-2.8%.

I am sure you can find someone charging 4% if you really look but how does it make 1.54% inexpensive if you can get great diversified alternatives for one tenth of the cost?  

Its true that an active fund’s manager can’t be judged based on a single years performance.  Still, the long term difference, on average,  is down to cost, so that’s a bad omen.  In this day and age even active funds can be bought far cheaper than this. 

The OP has their pension with a traditional insured provider, Standard Life ( maybe it is an employer pension).
Although they will have cheaper funds and they nearly always have discounts for fund size, or employer negotiated discounts, you can not get as low as you could with a low cost investment platform. Typically would be in the 0.3% to 0.7% range. Probably the 1.54% quoted for the managed fund is only the headline cost and there will be some kind of discount from it as well.
In addition this type of pension has typically no extra charges for changing funds, withdrawing money etc 

Of course though you are right that you can get cheaper.

Hi again Albermarle,

It's the Active Money Personal Pension.  The headline cost is 1.84% - which I believe to include transaction costs - and there is a 0.3% discount (0.5% for larger sums), making it 1.54% for an insured fund and there is no additional platform cost to pay.

On platforms, it's platform charge + 1.29% + transaction costs, so on the Aviva Pension it would be 1.69% + transaction costs (0.4% platform fee) or lower.  With AJ Bell, it would be 1.54% + transaction costs + dealing costs.

So on SL, it's cheaper and it also has the protections of being an insured fund.

engagedandopen

I had to request the Assessment of Value statement for 2023 through Standard Life.  Despite being dated October 2023, it certainly wasn't published then!

Performance for all existing Myfolio ranges was down again, but actually the Multi-Manager V fund has done relatively well in recent months and the period under review was July 2022-June 2023, so more understandable.  And better than the cheaper Myfolio Managed range, which uses mainly abrdn, Phoenix and Vanguard funds.

What is a shame is that abrdn present the year in isolation, without acknowledging it's the second year running of poor performance for Katie Trowsdale and co.  But their approach of adding in some smart beta trackers for UK and USA markets looks sensible.